How Many Loan Modifications Can You Get? Everything You Need To Know

Getting a mortgage loan modification can provide much-needed relief if you are struggling to make your monthly payments. By adjusting the terms of your loan, a modification can make your payments more affordable and help you avoid foreclosure. However, you may be wondering – how many loan modifications are you allowed to receive?

The number of loan modifications you can get depends on several factors:

Your Mortgage Investor

The first thing to understand is that the number of modifications allowed is set by your mortgage investor, not your servicer Your servicer simply manages your loan on behalf of the investor who owns it.

The most common mortgage investors are

• Fannie Mae
• Freddie Mac
• FHA
• USDA
• VA

These government-backed enterprises have published guidance on modifications that servicers must follow. Private investors may also set their own limits.

Fannie Mae and Freddie Mac

For loans owned by Fannie Mae and Freddie Mac, you generally cannot receive more than 3 modifications over the life of the loan. They also limit modifications through their Flex Modification program:

• If you get a Flex Modification and default again within 12 months, they do not have to offer another mod.
• If you miss trial payments for a Flex Mod, you cannot get another review for 12 months.

So while Fannie and Freddie allow multiple mods, there are restrictions once you have had one or more.

FHA

With FHA loans, there is no set limit on the number of modifications. However, there are timing requirements:

• You must make 12 payments before a new modification.
• Modifications cannot be within 3 years of each other.

So you could potentially get unlimited FHA modifications if properly spaced apart.

VA

For VA loans, the limit is 3 modifications total over the life of the loan. Additional restrictions include:

• At least 3 years between modifications
• Minimum 12 payments made on the loan

USDA

Similar to FHA, USDA does not publish a hard limit on the number of modifications available. The previously modified loan must be current for at least 12 months before a new modification is possible.

Private Investors

Private investors set their own modification rules. Some follow limits similar to Fannie Mae and Freddie Mac, while others may be more restrictive. If you have a private investor and need more mods than allowed, discuss options with an attorney.

Alternatives to Multiple Modifications

If you are not eligible for another modification, alternatives to explore include:

• Forbearance
• Refinancing
• Repayment plan
• Deed-in-lieu of foreclosure
• Short sale

While not ideal, these may help you avoid foreclosure if mods are maxed out.

COVID-19 Exceptions

There are exceptions to modification limits for certain COVID-19 related forbearances:

• If you entered COVID forbearance after being current on your mortgage as of March 2020, you should qualify for a COVID-specific modification program offered by your investor, even if you already had the max modifications.

It’s Easier the First Time

Is the process more difficult for a second or third modification? Not necessarily – the application process itself is similar each time.

However, with additional mods, you have fewer options available due to investor caps. And if the first modification didn’t provide enough relief, a second may not either. So in that sense, the first modification is the easiest opportunity.

Strategic Reasons to Apply

Even if you don’t expect to qualify for an additional modification, there can be strategic reasons to apply:

• Applying can prompt a foreclosure hold while under review. This may provide some extra time even if ultimately denied.

• Staying in an active loss mitigation process also requires the lender to consider you for other options like forbearance.

So consider applying as a way to keep options open, just be cautious of scammers promising unrealistic results.

Documentation Needed

Regardless if it’s your first or fourth loan modification application, you will need to provide documentation of your financial hardship. This usually includes:

• Hardship letter explaining your situation
• Bank statements
• Tax returns
• Pay stubs
• Bills/receipts if hardship is medical or emergency expenses

Providing complete, accurate documents is key to qualifying for mortgage relief.

Securing the Modification

Once approved, you will likely need to make trial payments on time before the modification is permanently applied. Missing trial payments can jeopardize eligibility so be sure you can handle the modified payment.

Alternatives Besides Modification

If you find yourself needing repeated modifications, it may signal an ongoing affordability issue or that the modifications themselves haven’t provided enough relief.

Some alternatives to explore:

• Selling and downsizing to a more affordable property
• Rental options if staying in the home long-term isn’t viable
• Consulting with a housing counselor to review your total budget and expenses
• Bankruptcy if there are no other options

Multiple mods can provide temporary relief but may just prolong an inevitable foreclosure without meaningful change.

Recap

To summarize key points on loan modification limits:

• The number of modifications allowed depends on your investor
• Government loans tend to permit more mods than conventional
• Exceptions exist for COVID-19 related forbearance
• Strategic reasons exist to apply even if you don’t expect to qualify
• Alternatives should be considered if you need repeated mods

Talk to your servicer to understand the rules that apply to your loan. And seek help from attorneys or housing counselors if you need mortgage assistance – you don’t have to navigate this alone!